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Clemen Chiang

Ph.D. | CEO | Investor | FinTech in Stocks | Blockchain in Cryptos | Singapore

Will November 5th Be The Turning Point For Bitcoin ETFs? 12 Oct 2018

Will November 5th Be The Turning Point For Bitcoin ETFs?

The issue of Bitcoin ETFs seems to be stuck in a bit of a ditch right now. Applications are rejected, resubmitted, and then left in limbo as the SEC push back dates for reviews. Approvals for Bitcoin ETFs, regardless of the actual applicant involved, are sure to become a catalyst for the evolution of Bitcoin and crypto- markets. The problem at the moment is that there is still a level of uncertainty over these approvals. Which proposals will get the green light, if any? Will applicants finally break free and bring ETFs to the market.

Those in favor of Bitcoin exchange-traded funds believe it is about time the SEC gave in.
The main aim here is to tempt more investors from the retail market. There are conflicting views about the need to bring in mainstream investors. Still, many see this as the only way to help legitimize Bitcoin and the cryptocurrency industry. ETF creators and supporters believe that this is the right approach because:

  1. ETFs are familiar and comfortable, unlike many of the bitcoin exchanges in operation at the moment.
  2. ETFs would herald another stepping stone between the uncertainty territory of current crypto-banking and the more recognizable systems of traditional banking.

The focus on this fight between Bitcoin ETF providers and regulators mostly centers around the US. The actions and rejections of the SEC mean that this side of the market has gained a lot of publicity. However, US bitcoin users shouldn’t overlook the fact that Sweden has worked with bitcoin ETFs for years now. Unsurprisingly, the SEC halted US trading with these funds too. Countries like Sweden prove that it can be done. Yet, the Sec continues to resist.

Many applicants have tried, failed and tried again.
There are many applications under review right now, many of which are appeals on previous rejections. The SEC rejected Bitcoin ETF applications from GraniteShares, ProShare, Direxion and the Winklevoss brothers over the summer. Some of these companies are determined to reverse the decision. The SEC is looking at proposals from VanEck and SolidX, as well as a proposition from Coinbase. Coinbase is looking to develop an ETF with BlackRock, one of the biggest asset managers around.

What is the probability of approvals occurring this time around?
The answer here depends on how optimistic we are prepared to be. There is room for optimism because the SEC has softened its stance a little. The fact that previously rejected applicants have a second chance at all is a start. The decision to bring public opinion into the review process is another step in the right direction. In fact, the SEC has received over 1400 comments about the VanECk Solid X Bitcoin trust, so the interest is there. There is also promise in the form of a voice of support within the SEC. Commissioner Hestor Peirce has stated her approval of Bitcoin ETFs in the past, claiming that the current SEC stance is counterproductive. This voice, if influential on others, could prove useful in turning the tide.

However, we can’t overlook the fact that the SEC keeps pushing back its dates for a final answer on approvals.
The deadline was, at one point, slated as October 26th. The SEC now has a deadline of November 5th for the review of nine Bitcoin ETF proposals. There is still reluctance here, as key concerns remain at the forefront of the assessor’s minds. SEC regulators will always cite security risks and the volatility of cryptocurrency as major reasons to hold back on approvals. One of the reasons that so many proposals failed this summer was the issue of market manipulation. There is the fear that a reliance on a single exchange puts users at risk of such manipulation. Those new mainstream investor could fall victim to whales. Still, if the market can remain stable for a while longer, this could work in its favor.

What does the future hold for Bitcoin ETFs?
This November 5th deadline comes just in time for the expected rollout of ICE’s own Bitcoin ETF — Bakkt. Bakkt could be a major player in the market, thanks to this collaboration between the Intercontinental Exchange, Starbucks and Microsoft. If this bitcoin ETF goes through, it could open the door to other applicants. This could be a big turning point, the moment where the Bitcoin ETF issue finally comes out of limbo and into public consciousness. Advocates, critics and investors will await November 5th with great anticipation.

References: 
1. https://www.forbes.com/sites/billybambrough/2018/09/06/bitcoin-could-be-boosted-by-a-new-potential-etf/#2c74a49754a5 
2. https://cointelegraph.com/news/cnbcs-ran-neuner-says-bitcoin-is-about-to-explode-points-to-pending-etf-decision 
3. https://bitcoinist.com/the-sec-sets-deadline-to-file-comments-for-or-against-bitcoin-etf-applications/ 
4. https://www.ccn.com/why-did-the-sec-reject-all-derivative-backed-bitcoin-etfs/ 
5. https://www.fool.com/investing/2018/09/17/bitcoin-etfs-have-a-supporter-at-the-sec.aspx 
6. https://www.ccn.com/sec-halts-u-s-trading-of-swedish-bitcoin-etf-bitcoin-markets-not-impacted/

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